- If you have children you've likely noticedthat the promotional mail pieces addressed to youare different from thoseaddressed to your children.I personally don't do a lot of shoppingat Forever 21, but the marketing team therethinks my daughter should.You see, they're using demographic datato target their customers.Segmenting by demographicsis the practice of dividing a market by factorssuch as age, sex, household size, income,education level, race, nationality,you get the picture.

By looking at these variables,you can get a more detailed image of the market,because people that belong to groupstend to behave in manners similar to othersin the same group.It makes sense to look at the things the groupmembers have in commonand attempt to draw some insights from those commonalities.Let's dive into some of these groupingsa little more deeply.Age is very commonly used as a segmentation variablebecause it is typically easy to gather informationon the average age of consumers in a market,and it's a meaningful indicator of how consumersare going to behave.

Makes sense, right?Teenage girls are shopping for different thingsthan 65 year old women in terms of products and services.Income is an important segmentation variablebecause it can be an indicator of not only what kindsof products and services a person or family will want,but also where and how they may purchase.Consumers in higher income bracketstend to shop for different products,and they have historically done more online shoppingthan those with lower incomes.A closely-related segmentation approachis to place people into life-stage categories.

As people grow older, they tend to move through phasesof their lives that lead to changes in the amountof disposable income available,the types of purchase decisions they're making,as well as the products and services they need.I've included a life cycles stages handoutin the exercise files that really helped bring this to life.This commonly-used model shows how consumersmove from the bachelorhood stage to newly married couples.As children arrive, they move througha series of nest stages, and then into empty nest stages,and then finally back to a solitary stage.

You can appreciate how the amount of moneya couple with young children differs from the financialmeans of a couple celebrating their entranceinto the empty nest stage.For each demographic segmentation variable,there are differences in the needs, wants,habits, shopping styles, and purchasing processesfor the people within the group.Being attuned to these differences may help yougain more and deeper insights.Imagine for a moment that you've invented a new watercraftthat you've specifically designed to go as fastas today's jetskis, but it'll run more quietly.

and you've figured out how to keepthe riders from getting wet.While jetskis are popular, not every person,or even every household in the U.S. owns one.Some research on the personal watercraft marketindicates that the average owner is 41 years oldand has an income of 94,000 dollars.85 percent of them are male,40 percent are college graduates,and 71 percent of them are married.So let's compare these to some national averages.The median age for males in the U.S.

during the 2010 census was about 36.The median income was about 53,000 dollars.49 percent of the U.S. population is male.30 percent are college graduates,and approximately 52 percentof American adults are married.Knowing these details will be helpful as you designyour product, develop your pricing plans,and promotional strategies.The key is to figure out which demographic variablesare important to your business.To help you do this, I've included an exercise filefor you to complete.

This contains a list of demographic variableswhere you can begin to track the datathat will matter most to you.I've used data from the U.S. market in this example,but the principles apply around the world.You can find demographic data on most countriesat CIA.gov or worldbank.org.The national averages for some of the keycomponents are already loaded for you.By doing some web searching, you'll usually findsome data points to load into the next columnlabelled for the next market.

As you dig deeper or do more research on your own,you may find different subsegments.For example, if your company makes more than justpersonal watercraft, but also other typesof recreational vehicles, you could create a columnfor your personal watercraft segmentand another for the all-terrain vehicle segmentof the market.A good way to get an appreciation for the powerof demographics is for you to compare the datafor the zip code in which you liveto the national averages on this worksheet.Most states have the data for each zip code availableon a website, take a look and then think about howyour neighborhood is similar and differentfrom the U.S. population as a whole.

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Released

9/14/2015

Learn how to group your customers into market segments to better understand what they really want. In this course, chief marketing officer Doug Ladd explains the basics of customer segmentation. He describes segmentation based on geography, demographics, culture, behavior, and psychographics. He also shows where to look for this information, how to analyze it, and how to develop model customer personas that can help in product development, service level planning, and more.